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Twenty years ago, dealership sales people held all the cards when it came to customers buying a car. They knew all the details, all the pricing information, all the disclosures, incentives – everything. About the only thing the customer knew was what color vehicle they wanted. Today’s transactions tell a different story. It’s not uncommon that customers come onto the lot knowing more about the car they want than the person selling it. Hiding information about your inventory is not as useful or beneficial as it used to be, but each individual dealer needs to weigh the risks against the rewards of being transparent.
When we talk about transparent pricing to resistant dealers, the often-heard rebuttal ultimately returns to them losing gross margins on the sale if they share their pricing. What some can’t seem to grasp is that they’re often going to lose the deal completely if they don’t share they’re pricing. Of course, there are always exceptions to the rule, like subprime financing. However, the risk of withholding pricing information on a vehicle generally doesn’t outweigh the reward.
Contrary to popular belief, pricing your vehicles online doesn’t mean you have to have the lowest price. When customers are shopping online and get a hundred search results, they aren’t going to shop 100 stores. Most often they’re going to filter by their preference for the vehicle, including price, and preference for the store in order to narrow their search to 5 or so stores to shop. All you need to do is make sure you’re priced relevant enough to make it to the list of 5. Perhaps that’s priced as an average compared to the rest of the vehicles, or maybe it’s $200 more expensive than the cheapest options, but whatever works for your store, your vehicles have to be priced. On some sites, showing no price online is worse than being the highest priced, because unpriced listings fall to the bottom of the search regardless of how the list is sorted.
When you do price your vehicles, withholding information on pricing, can also be a risky move in terms of compliancy. Do you know your state’s regulations on advertising price for inventory? Do you outline MSRP, incentives, and kickbacks, or just the bottom line? Not being upfront about your pricing and even how you got there might put you in jeopardy of non-compliancy, and we’ve already seen how the FTC is handling that mess. In this case, the risk of withholding information might be worth it now, but it’s only a matter of time before it’s not.
Weighing the risks against the rewards of withholding information is necessary on a number of factors that are customer-facing, including doc fees and so forth. Today’s shopper is very savvy and demanding of information, and that will play a huge part in your evaluation. Constantly evaluate your process and tactics to make sure they are up-to-date and on par with customer expectations as well as state compliancy.
You can learn more about online pricing and compliancy in our white paper, “New-Car Price Transparency and Regulation Study, Spring 2012,” available for FREE download at http://www.drivingsales.com/research/new-car-price-research-study.